How Can I Report Rental Property As Income?

Rental property income is income, just as you might receive from a job or other source. To legally take in this income, the Internal Revenue Service (IRS) will need to tax the income. But to pay the correct taxes, you need to learn what counts as rental property income, how to document the income, and how to report it to the IRS.

What Counts at Rental Income

Rental property income is defined as any money that a person receives from a rental property tenant. This might come in the form of actual rent, or this income may arrive as payments for expenses the tenant may have incurred. For example, if the tenant pays for a repair, then this is counted as income for the rental owner. However, these payments may be deducted from the income as well, depending on the type of payments.

Document Your Income

A rental property owner should track rental property income with a spreadsheet. This file can document when the payments and check numbers. It's also a good idea to keep copies of all of the checks or have the bank send the check stubs at the end of the month. By keeping a record of all of the rental property income, it is easier to file taxes.

Tell the IRS

The IRS requires that all landlords report all rental property income as income on their tax forms. The income reported must be received within the tax year, even if the income is for previous years or future years. Any income received within a year must be claimed. Security deposits do not have to be included in the income report, as they are meant to be given back to the tenant when they move out and thus will not be income in the future.

References

• IRS: Small Businesses
• Business Week: Tax Traps
• Quiz Law: Rental Income